Illinois would balance its budget by shifting pension burdens to local taxing bodies and cutting employee health care costs, under Gov. Bruce Rauner’s proposed fiscal year 2019 spending plan.
“Our reforms must begin with pensions and employee group health expenses. They now consume 25 cents of every dollar that the state spends, and they grow faster than you can raise taxes and we can grow the economy,” Rauner told lawmakers during his budget address last week. “In FY 18, we spent more of our budget in these two categories than we spent on K-12 education.
“The simple truth is this: We have to change the way we manage pension costs and group health expenses. If we don’t, our finances will continue to deteriorate, our economy will remain sluggish and our tax burdens will stay high and keep rising.”
Rauner said that his FY 2019 budget addresses the problems head on and would create a surplus that would get the state out of debt.
He said shifting the pension costs “to the people who do the buying, and make them responsible for the paying, too” would get rid of the state’s deficit.
“If we do this realignment, we can eliminate the $2 billion deficit in the budget you passed last summer, avoid new taxes, fund top priorities, and start the long process of paying down our bill backlog with cash instead of credit,” Rauner told members of the state House and Senate.
He said that comprehensive pension reform would give Illinois taxpayers a nearly $1 billion tax cut.
“They deserve it and they can use it,” Rauner said. “This is the kind of financial accountability that Illinois taxpayers expect. It is time we lived up to their expectations.”
Under Rauner’s budget plan, school districts would begin to pay the cost of their own pensions. The transition would be phased in over four years with schools’ portion of pension costs increasing 25 percent per year.
He said in exchange, schools and municipalities would get increased education funding, the power to dissolve or consolidate units of local government, and more flexibility in contracting, bidding and sharing services.
The governor said that by also “right-sizing” employee health insurance plans the state’s employee compensation would be more in line with what taxpayers have for their own coverage. He noted that the state pays almost 90 percent of the premiums for government employee health insurance policies that are more expensive than plans in the private sector.
“State government needs to do what every employer in Illinois has done over the last 10 years: Get its health care costs under control,” Rauner said. “Taxpayers shouldn’t have to pay for government health insurance policies that are richer than ones they can afford for themselves.
“If we legislate group health insurances changes the way the Massachusetts legislature has done, we can save Illinois $470 million in general revenue funds this year and $560 million in all funds,” Rauner said.
The governor said the state also has to reduce workers’ compensation insurance rates.
“They are the highest in the Midwest, and they are pushing out our manufacturers,” the governor said. “Business leaves the state to escape them or won’t come to avoid them.”
— Gov. Rauner targets pensions, insurance costs in budget —-